U.S Residential Real Estate – A Series: Part 3 (Tampa, FL Market Outlook)

 By David Franklin

SINGLE FAMILY RESIDENCE MARKET OUTLOOK FOR TAMPA-ST PETERSBURG-CLEARWATER (THE TAMPA METROPOLITAN STATISTICAL AREA (MSA))

Canadians love to invest in Florida, which is a favorite destination of Snowbirds. The residential prices in the Tampa MSA decreased in value dramatically as a result of the recession. Prices have been increasing, however, and investors, including Blackstone, the largest single-family residential buyer in the US, have made substantial investments in this single-family residential market. The Tampa MSA has a diversified economy and is the second-most favorite choice for American baby boomers to retire to in the US.

Prices in Tampa are, even after their increase in price, still below replacement cost. Further, the cost of owning is substantially less than renting as compared to Canadian cities.

POPULATION

The Tampa MSA population of 2,866,000 is projected to grow by 1.41% yearly to 4,361,000 by 2042. This projected population growth, as compared to the largest Canadian cities covered by REIN, is greater than that of the Greater Toronto Area (GTA) of 1.38% yearly to 2031, Toronto of .89% to 2031, Ottawa yearly of 1.27%, and Metropolitan Vancouver of 1.19% to 2041 and less than Calgary of 1.79% to 2041 and Edmonton of 1.68% to 2041. The population of the Tampa MSA is greater than the current populations of Ottawa 883,391, Metropolitan Vancouver 2,443,300 Calgary 1,468,701, and Edmonton 1,331,893 and less than the GTA 6,400,000 and Toronto 2,790,000. The projected population of the Tampa MSA will be greater than Toronto 3,450,000 (2036), Ottawa 1,136,000 (2031), Metropolitan Vancouver 3,400,400 (2041), Calgary 2,416,865 (2041) and Edmonton 2,215,455 (2041) and less than the GTA 8,900,000 (2036).

TAMPA MSA HOUSE PRICE CHANGES

According to the S&P Case-Shiller House Price Index, the peak index amount was 238.1 which occurred in July 2006 and the lowest index amount was 123.9 which occurred in February 2011, a decline of 92.2%. Prices of houses have increased since then and the index amount on October 2014 was 163.85 which translates into an increase from the low of 32% and it is still 45% below the peak index. The current prices are still below replacement cost and that is one of the reasons that house prices are projected to increase by 5.7% yearly over the next several years.

INVESTMENT PRICES

Single-family residences can still be acquired where the rent, as a percentage of investment prices, which includes the cost of repairs and closing costs, is 12% or 1% of the investment price. For example, if the rent is $1,000 a month, $12,000 a year, the investment price is $100,000. Compare this to Canada where in certain cities, aside from especially Toronto and Vancouver, investment properties can be acquired, where the rent as a percentage of purchase price, ranges from 6.5%, $184,615, to 8%, $150,000, being 84.6% more to a low of 50% more.

TAMPA MSA — OTHER STATISTICAL INFORMATION

• Apartment rents Projected to increase by 4.4% for 2015; down from 4.9% in 2014,
• Vacancy rate: 5.4% down from 5.6% in 2014
• Average Rents: $978 per month
• Unemployment rate: 5.8% (Nov 2014), down from 6.5% (Nov 2013)
• Economic growth: The equivalent of GDP for the MSA increased 2.1% from 2013 to 2014. It increased by.9% from Q1 2014 to Q2 2014
• Median household income: $56,800 (in 2013)

AFFORDABILTY OF SINGLE-FAMILY HOMES COMPARED TO CANADA (IN AFTER-TAX INCOME)

For the Tampa MSA, based on the median sale price, the cost of owning was 3.26 times after-tax income. By comparison, here are the ratios for major Canadian cities:

• Toronto 10.21;
• Vancouver West 40.15;
• North Vancouver 18.22;
• West Vancouver 33.69;
• Calgary 6.28;
• Edmonton 5.83; and
• Ottawa 4.36.

CONCLUSION

Based on the key drivers, the Tampa MSA is in a robust recovery market which should, in due course, become a boom market. It has a diversified economy where the population and economy is growing and is in a recovery market. Those who are planning to relocate to Tampa might want to get in touch with a property broker (such as https://yoursouthtampahome.com/moving-to-tampa) or a real estate guide. Apartment rents are increasing, and the vacancy rate is decreasing as is the unemployment rate. Prices in this marketplace are increasing and are still below replacement costs. The cost of owning is less than renting which should help in having renters buying in this marketplace, in addition to end buyers and investors. Further, the cost of owning a single-family residence is substantially less than in the Canadian cities covered by REIN.

David Franklin, B.Comm, JD, has been practicing law in Ontario for over three decades, specializing in securities, mortgages, tax and real estate, and overseeing and transacting millions of dollars of transactions. Contact David at david@reincanada.com.